Startup negotiation – first engineer hire

https://news.ycombinator.com/item?id=8071330

by dvt • 12 years ago

11 15 12 years ago

news.ycombinator.com

Two non-tech founders. Bay area. Series A went well, they made about 500k. They came to me looking for a senior developer with potential for CTO to write 1st prototype and take charge of development. First few meetings went well, and they asked what I would like to be paid.

What are some guidelines for salary/equity? Would 140k and 2% seem greedy?

PeekPoke• 12 years ago

So you want 28% of their funding and 2% of their equity?

28% seems high to me but I don't know their circumstances, be ready swap salary for equity (or vice versa) depending on what they can pay.

dvt3• 12 years ago

Yes, but keep in mind that this is 28% over an entire year (during which I'll be working there) -- not a bulk sum.

But maybe you're right and it's too much.

glimcat• 12 years ago

Their funding isn't your problem.

Either they can meet your compensation requirements, or they can't and you go elsewhere, or you find a compromise if you both want it to work.

If you're a decent engineer who can get things done and out the door to some reasonable professional standard, there are a LOT of elsewheres.

crazypyro• 12 years ago

How did two non-tech founders raise 500k without a prototype or engineer lead?

This can't be usual....

dvt3• 12 years ago

It's not usual, but they seem like smart guys and they both went to a great school. Some of their ideas are pretty good and I guess they really resonated with investors.

FWIW, their advisors are from a relatively famous California combinator.

Alex-Galapagos• 12 years ago

Do you mind providing that advisor's name? We're looking for an advisor right now. You can pm me @ zakapar@gmail.com

sauronlord• 12 years ago

Huge red flags:

Have great ideas: indecisive and flaky

Chance to be CTO: Yeah right. Become CTO now

2%....too risky and tiny payoff.

Here's what I would do:

149k/year

21 - 32% equity, with linear vesting over 4 years. 6 months and vesting starts until 3.5 years later

28k signing bonus

Don't be a sucker. They will both your worse nightmare.( two dads!)

There's no product, there's no revenue, no prototype. Sounds ridiculous.

They have a pitch deck. However ideas are cheap and some investors are dumb.

Make sure any shares are voting shares and look for the termination clauses and trigger events.

Don't sign any agreement without a lawyer explaining things to you.

Good luck

mifreewil3• 12 years ago

I agree with this mostly other than the huge salary in relation to the amount of equity.

7Figures2Commas• 12 years ago

A $500,000 raise pre-prototype is not a Series A. It's a seed round in a market in which lots of seed rounds (perhaps the majority) are being raised by companies that already have a prototype or launched product.

That means this company is going to be playing catch up. Instead of using $500,000 to improve an existing prototype or product, or scale a nascent business, the founders here need to use the $500,000 to build a product from scratch and get it to market successfully. If they don't, it is unlikely they will be able to raise a Series A because while the bar for raising seed funding is incredibly low today, the bar for raising a Series A is fairly high and only getting higher.

If you're intent on being this company's first engineering hire, responsible for building the first version of the company's product, you should consider that you are largely going to be responsible for getting the company to the point where it can raise a Series A, which is going to be a low seven-figure amount at a minimum.

In other words, if you deliver, you are going to put these founders in the best position possible to raise millions of dollars at a valuation meaningfully higher than the current valuation. From this perspective, you might want to consider that $140,000 and 2% of the company is not too much but rather too little.

dvt3• 12 years ago

Sorry, meant to write seed not Series A, mea culpa. I am very sympathetic to your reasoning, especially considering I'm interviewing with other AAA companies and startups that are offering 120k+ & benefits, so it's not like I'm short on opportunities.

But being an early tech hire is quite appealing, especially if the company takes off. Thanks for the post.

mifreewil3• 12 years ago

If you're looking to join this company that doesn't even have a prototype and has no technical people, then I would consider yourself to be a founder. If you want to be a founder, 140k would probably be too high at this point for a salary, but I would be looking for at least 20% equity.

If you don't want to be a founder, then keep looking.

mifreewil3• 12 years ago

Another piece of advice, you might want to look into the other two founders' background and investigate how long they have been working together. You don't want to deal with a founder breakup.

gumballhead• 12 years ago

Greedy? Not only are you the first engineering hire, but you're the first engineer, of what I presume is a technology company.

The salary is too high and the equity too low for a company at that stage.

JSeymourATL• 12 years ago

Remove the word greedy from your vocabulary. These guys have nothing but an idea and seed capital. They need a solid tech founder to build and navigate uncharted territory. Create yourself as their peer. You're the prize. They need to earn your attention, respect, and time. Suggest reading Oren Klaff.

chadkruse• 12 years ago

The times I've been in this situation it really came down to figuring out if I was a true co-founder or just the hired gun. True co-founder roles meant I was confident in the founder(s) ability to execute, was confident we'd work well together (takes time), and was stoked about the industry/product/role. We paid ourselves the same salary, I received founders shares (not options), and off we went.

When I didn't have time to properly date first I just assumed I was the hired gun. In these situations the cash component was high and any equity vesting immediate.

Do you have enough time to flirt/date to get a better handle on how you'd work together as a team?

Startup negotiation – first engineer hire

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